This paper proposes a novel approach to the estimation of Customer Lifetime Value (CLV). CLV measures give an indication of the profit-generating potential of customers, and provide a key business tool for the customer management process. The performances of existing approaches are unsatisfactory in multi-service financial environments because of the high degree of heterogeneity in customer beh...

Previous work on the solution to analytical electronic customer relationship management (eCRM) problems has used either data-mining (DM) or optimization methods, but has not combined the two approaches. By leveraging the strengths of both approaches, the eCRM problems of customer analysis, customer interactions, and the optimization of performance metrics (such as the lifetime value of a custom...

(1) Problem Definition: We provide guidelines on three fundamental decisions of customer relationship management (CRM) and capacity management for profit-maximizing service firms that serve heterogeneous repeat customers, whose acquisition, retention, and behavior depend on their service access quality to bottleneck capacity: How much to spend on customer acquisition, how much capacity to deplo...

This paper proposes a model for customer relationship management (CRM) using iThink , which incorporates the concept of system dynamics. The proposed CRMmodel consists of module 1: a customer purchasing behavior model, module 2: a Markov chain model, and module 3: a financial returns model. By considering the marketing activities and product attractiveness to the customer, the probability that ...

At a time when financial reporting is less than reliable, Behram Hansotia proposes that companies use a customer value scorecard to report statistics associated with customer lifetime value. These scorecards will clearly show if a company is making progress in increasing customer loyalty and share of wallet. C EOs, academicians and the financial community are all dissatisfied with the standard ...

The paper outlines a framework for autonomous control of a CRM (customer relationship management) system. First, it explores how a modified version of the widely accepted Recency-Frequency-Monetary Value system of metrics can be used to define the state space of clients or donors. Second, it describes a procedure to determine the optimal direct marketing action in discrete and continuous action...

In this paper we focus on the analytics of implementing CLTV in SAS®. We describe the different analytics steps needed to implement the CLTV framework, appropriate SAS procedures and some pitfalls to avoid. We first layout the data requirements and analytics framework for putting together a CLTV measure, and then discuss the different components in greater details. Two key components of the mea...

In information technology era, databases are known asone of the most valuable resources for organizations, especially usedin database marketing. Customer Equity is a key concept in DatabaseMarketing which integrates customer acquisition, retention and development.From the perspective of customer equity, customers are theprimary source of both current and future cash-flows. Customer equitymodels...

As more firms begin to collect (and seek value from) richer customer-level datasets, a focus on the emerging concept of customer-base analysis is becoming increasingly common and critical. Such analyses include forward-looking projections ranging from aggregate-level sales trajectories to individual-level conditional expectations (which, in turn, can be used to derive estimates of customer life...